Strategies for Retirement Saving

Even if it’s decades away, the prospect of affording retirement still looms large and may leave you worried about how you’re going to save enough. Saving for retirement can be intimidating and easy to put off when you’ve got more immediate bills to pay. Here are tips, however, to help you develop a strategy for saving.

How to save

If your employer offers a retirement savings vehicle such as a 401(k), make sure you’re contributing, at a minimum, enough to get any potential employer match. Also, keep in mind that money placed into a 401(k) reduces your before-tax income, providing you a tax break.

You can also put money into an Individual Retirement Account (IRA). There are two types: a standard IRA, in which the money is taxed later when it’s withdrawn, or a Roth IRA, in which the money is taxed when it’s deposited but can be withdrawn under certain circumstances tax-free. If you’re younger, the Roth may be the best way to go, as you can typically expect to be taxed at a higher bracket when you’re older and looking to withdraw the money. The Motley Fool website offers a detailed breakdown of the differences between types of IRAs.

You can direct your bank to send money automatically to a particular savings account. That way you don’t have to think about whether your retirement saving has been taken care of each month — you know it’s done.

What to do with your retirement savings

You can open a regular savings account with your bank, but financial experts generally don’t recommend that you leave your money in cash over an extended period of time. Inflation likely will outpace the interest rate you’re receiving on a savings account, meaning your retirement savings will buy much less when it’s time to actually retire.

So how do you make sure your retirement savings grow? It’s not easy and never guaranteed, but most financial advisors recommend you put your money in stocks when you’re younger, then shift to more conservative investments, such as bonds and certificates of deposit (CDs), as you get older. Some mutual funds are “age-targeted,” meaning they will automatically change type as time passes.

If you’re unsure about investing, look for index funds (meaning, the fund buys stock in a particular “index,” such as the Dow Jones Industrial Average or the S&P 500) with very low associated costs. Investment houses such as Vanguard or Fidelity offer a variety of index funds.

Still nervous? It won’t hurt to meet with a financial advisor. Many offer free initial consultations, so you can decide whether you’re comfortable spending money to learn how to save your money.